If you think that your debt payment fund is not enough, you might have to impose extreme lifestyle changes. Most of the time, the presence of debt is an indication that you are overspending. After all, any amount that your income cannot cover will be paid for by credit.
So if you find yourself struggling to meet your debt payments, you might have to take a closer look at your lifestyle. Ask yourself, how do you spend your money? According to reports, the average American household earns a pretax income of nearly $75,000. Almost all of that money is spent – around 90%. Since this is based on pretax income, there is a chance that the average household is overspending.
This is a dangerous lifestyle because, on a good month, you will probably just be living from paycheck to paycheck. However, if it happens to be a bad one, you might be forced into debt. In case something unexpected happens, your current lifestyle might force you to borrow a lot of money in order to get past that situation. If life decides to throw a lot of curveballs at you, that might lead to a mountain of debt that you cannot get past.
Obviously, if your current lifestyle is causing you to borrow money, something has got to change. It is not just to help you stop borrowing money. It will also help increase your debt payment fund.
Lifestyle changes that will be good for your debt payment fund
Sometimes, making small changes and sacrifices will not be enough to turn your financial situation around. There are times when you need to make extreme lifestyle changes so you can save money easier. With the money that you save, you can focus on improving your personal finances. Since debt usually has the biggest effect on your financial life, it is a good idea to start with it. Any amount that you save because of the lifestyle changes that you will implement can be added towards your debt payment fund.
The question is, what are the extreme changes that you should implement in your lifestyle?
Living with someone
We are not saying that you should take anyone from the street and live with them. But you need to let go of the idea of living independently. Having a roommate is usually a great way to save on your monthly payments. If you are in a serious relationship, it may be a good time (and practical one!) to move in together. That way, you can share costs inside the house. Since your rent or mortgage takes the biggest percentage in your budget, splitting it in half with someone should lower your monthly expenses. Just make sure you choose the person you will live with carefully. That way, you will not feel miserable in case you realize you do not like your roommate after all.
Transferring to a smaller house
If you do not want to live with someone, you might want to live in a smaller home instead. Living alone will not require a huge space – especially if you will be gone most of the day to go to work. You can opt to join the people who have opted to live in a tiny house! You may think that this is too much of an extreme but it does come with a lot of benefits.
A lot of people claim that their financial situation changed for the better after moving into a tiny home. These tiny homes do not cost a lot of own. In fact, you can build one on your own. The upkeep and utility bills will also not be too high. And since you have a small space, you have to let go of a lot of things. Not only that, but you also have to be cautious about what you will buy. If you do not have space for it, then it does not make sense to buy it. This will result in a lot of savings that you can add to your debt payment fund.
Using only one car
This is actually true for families. Instead of owning two vehicles, you might want to just use one. A car depreciates in value. This means the longer you use it, the lower the value. Keeping more than one car will not make your net worth grow over time. You may think that this will be a huge adjustment, especially if you and your partner or spouse need to have your own cars. But it can work if you are determined. One can drop off the other at work. You should also consider having a fuel efficient car to save costs.
Cutting back on entertainment expenses
People might not agree to this – but this area can really help you increase your debt payment fund significantly. According to, the average American adult spends $1,497 on non-essentials each month. This is almost $18,000 every year! These non-essentials include eating out, impulsive purchases, subscriptions, etc. These are expenses that you can live without. If you really want to increase your debt payment fund to improve your financial situation faster, you need to cut back on unnecessary expenses. If you really want to give yourself a break every now and then, you should be creative enough with it. There are many cost-efficient ways to entertain yourself without spending too much money on it.
Working during your free time
This is another lifestyle change that might not be appealing to most people. Using your free time to keep on working seems like an exhausting thing to do. However, if you really want to be financially successful, you need to be prepared to make the sacrifice. This will not just increase your income to increase your debt payment fund. It can also keep you from spending money. If you are working, there is no time to go shopping or to eat outside. And considering all the effort you use to work, you will not feel like going out at all. You will just sleep and rest whenever you are not working.
To keep yourself from feeling burnt out, you might want to choose a job that you can easily do. Setting up a passive income is one option. But you can also find a way to capitalize on your hobby. At least, if you have to work hard, you will be doing something that you love.
How to manage your debt payment fund properly
Once you have enough debt payment fund, it is also important for you to learn how to manage your finances properly. Here are tips that will help you accomplish this.
Use it as intended
First of all, you have to force yourself to use it as you intended. If the debt payment fund is meant for your debts, then that is what you should use it for. It is tempting to use it on other expenses like funding a vacation or paying for a date. Since you worked hard to change your lifestyle to make this fund grow, you should make sure that it will not be wasted on something else.
Include it in your budget
It is also important to include this fund in your budget. Indicate in the budget that the amount in the debt payment fund will only be used for your credit obligations. Put it side by side with your other expenses so you can ensure that your money goes where it should. There will be no confusion as to what you will use on the other expenses that you need to pay for.
Put your extra money in it
It takes a lot of discipline to do this. Usually, our first reaction is to spend it to enjoy and relax. But that is not always a smart move. If you earn extra cash through commissions, a side job or even get one as a gift, make sure you use it right. Add it to your debt payment fund. It is okay to use some of it for entertainment purposes. But make sure you do not use it all. Allow yourself to use a small percent of the extra money and the rest should be added to your debt payment fund.